Overview
This section identifies the specific cost principles and standards used to determine allowable costs for contracts with nonprofit organizations, while establishing clear jurisdictional boundaries between different FAR subparts based on the type of organization.
Key Rules
- Default Standard: FAR Subpart 31.7 serves as the primary authority for cost principles applicable to most nonprofit organizations.
- Educational Exceptions: Contracts with educational institutions are governed by FAR Subpart 31.3 rather than the general nonprofit rules.
- Governmental Exceptions: State and local government entities follow the principles laid out in FAR Subpart 31.6.
- OMB Exemptions: Certain nonprofit organizations specifically exempted under 2 CFR part 200, appendix VIII, must follow the commercial cost principles in FAR Subpart 31.2 instead of the nonprofit-specific standards.
Practical Implications
- Contractors and legal teams must accurately classify the nonprofit entity type at the outset to ensure compliance with the correct accounting standards and audit requirements.
- Large or specialized nonprofits listed in the OMB Uniform Guidance are treated as commercial entities for cost-accounting purposes, potentially requiring more rigorous financial systems to track allowable costs under FAR 31.2.